Record Paid Electricity Journal Entry by
- Debiting the electricity expenses
- Crediting the bank account.
What’s the purpose of Electricity JE?
To record the power usage charges.
It can be a direct or indirect expense.
How about an example here?
Consider an Entity.
It’s into goods manufacturing.
Assume it is an automatic process.
So, there is more electricity demand.
Therefore, electricity is a direct expense.
When will there be an indirect expense?
In the case of less direct dependence on power.
Table of contents

Paid Electricity Journal Entry

Why do we need to debit the electricity expenses?
Instead of debiting the electricity expense, can we credit the expenses?
To do this, we need to understand the nature of the account and the group under which it falls to determine whether we need to debit or credit it.
There are three broad categories of accounts: Personal, Real, and Nominal. So, we need to determine the Category of each GL in the transaction to apply the respective accounting rules.
This transaction involves two accounts – the Electricity GL and the Bank GL accounts.
The electricity account is an expense account and falls under the Nominal Account Category. Per the Nominal Account, the golden rules of accounting are to debit all expenses and losses and credit all incomes and gains. So, we need to debit the electricity account in the journal entry.
The Bank Account is a Real account. Per the Golden accounting rules, debit what comes in and credit what goes out. So, we need to credit the bank account in the entry.
Runners Insight:
If you want to gain a good understanding of how to record routine monthly expenses, refer to the topics of rent paid and telephone charges.
Alternative Treatment:
Accounting has no rules except the golden rules, so there is a lot of flexibility regarding accounting for a particular transaction. The alternative treatment for an electricity journal entry is below.
1) Accruing the Electricity Expenses
Electricity expenses and Electricity Payable are the two GLs here. We already understood electricity expenses, so let’s move on to Electricity Payable. It’s a Liability account related to the Personal Account.
Per the Golden accounting rules, debit the receiver and credit the payer. So, we need to credit the Electricity payable account.

2) Paid Electricity Journal entry

Example
ABD provides consulting professional services related to taxation. Therefore, it incurs an average monthly expense of $30,000 for electricity. ABD receives the electricity bills after the end of the month. However, the entity needs to record the accrual of costs as part of the month-end reporting process.
Entry to record the accrual expenses

Later, the entity received the electricity bill and noted that the current month’s charges were $30,500. So, there is a shortfall of $500 for the month. There are two approaches to recording these expenses.
1) Recording for the shortfall (or)
2) Reversing the accrual expenses on the first of next month and recording the actuals.
In General, entities adopt the second approach. So, the entity reverses the accrual entry and books for the expenses below.
Reversal Entry

Actual expenses Entry

Summary of Paid Electricity journal entry
The paid Electricity journal entry is recorded by debiting the electricity expenses and crediting the bank account. These utility expenses are essential for any business to survive. The company will generally accrue these expenses at the end of each month and reverse the same on the first day of the following month. This step ensures we consider all the period expenses per the cut-off assertion. If there is any levy of taxes for electricity usage, then it is not required to have a different GL head, as the entity itself is its end consumer. We hope this article provides some clarity on the electricity journal entry.